How to Sell Private Stock

by Kristen R. Price

Selling private stock is not as straightforward as selling public stock.

If you own shares of a public company, selling that stock is a pretty straightforward process. You’ll simply need to work with a licensed stockbroker to sell the shares back into a public offering. However, if you own private stock, selling your shares can be a bit trickier. Since stock in private companies is not traded on the public market, your options for selling are limited.

Private Stock

While privately held companies are not publicly traded, it is not uncommon to receive stock in a private company. Often, employees of a private company are offered shares in the business as part of their compensation plan. Additionally, many venture capitalists or private investors may purchase stock in private companies. Through offering private company stock, entrepreneurs can build a good deal of capital to support their businesses. However, because these investments cannot be quickly sold on the public market, the investments are much less liquid than those of public companies.

Private Stock Buyback

The simplest way to go about selling private stock is to go back to the company that originally issued it. Often, these private companies have stock buyback programs in place, allowing you to sell your private stock without much complication. If the company does not offer a buyback program, the investor relations department might have information on investors willing to purchase company shares.

Intermediaries

While selling a public stock can be as simple as calling a stockbroker or logging into your online brokerage account, selling a private stock isn’t as simple. Many experts recommend using a securities attorney as an intermediary to complete the transaction. Private companies are not registered with the Securities and Exchange Commission (SEC), but you’ll still be required to follow SEC regulations when selling private stock. Additionally, public trading is much lower risk, since information on the company is publicly available. It can be much more difficult to find information on private companies, making it a potentially riskier investment. A securities attorney can help mitigate risk for all parties to the transaction.

Vesting

Keep in mind that purchasing private stock or accepting stock as part of an employee compensation plan often requires you to hold the shares for a certain period of time before selling it. This is called the vesting period. Before selling your stock through a company buyback plan or by finding an interested investor and soliciting the help of a securities attorney, you’ll need to make sure your shares have vested. If you purchased your stock over time, some shares may be available to sell while others may not. If you have questions, speak to the investor relations manager at the company issuing the stock.

References

About the Author

Kristen Radford Price began writing in 2005 for her campus newspaper. She has served as a feature writer for the life-and-style section of the "Daily Herald," a contributor to "Utah Valley Weekly," an editor for a small publishing house and now as director of communications for an Internet company. Radford has a Bachelor of Arts in journalism from Brigham Young University.